Sawmills and Wood Preservation

Industry Profile Report

Dive Deep into the industry with a 25+ page industry report (pdf format) including the following chapters

Industry Overview Current Conditions, Industry Structure, How Firms Operate, Industry Trends, Credit Underwriting & Risks, and Industry Forecast.

Call Preparation Call Prep Questions, Industry Terms, and Weblinks.

Financial Insights Working Capital, Capital Financing, Business Valuation, and Financial Benchmarks.

Industry Profile Excerpts

Industry Overview

The 2,700 sawmills and wood preservation companies in the US produce and treat a variety of wood products, including structural elements and dimension lumber. Major revenue categories include softwood lumber, hardwood lumber, preserved wood products, and wood chips. Sawmills may provide wood preservation services as a final step of production. Some large companies are vertically-integrated and own timberland or downstream operations, including divisions involving real estate ownership and residential construction.

Sensitivity To Economy And Construction Activity

Demand for wood products is highly dependent on the health of the construction and household furniture industries, both of which are sensitive to economic conditions.

Variable Timber Costs And Supply

The cost and supply of timber can be volatile, and affect margins and profitability for sawmills and wood preservation services providers.

Industry size & Structure

The average sawmill and wood preservation firm operates out of a single location, employs about 31-32 workers, and generates $11 million annually.

    • The sawmill and wood preservation industry consists of about 2,700 firms that employ 87,700 workers and generate $30.5 billion annually.
    • Sawmills account for 90% of firms and 78% of industry revenue.
    • The sawmill industry is fragmented; the top 50 companies account for 53% of industry revenue. The wood preservation industry is concentrated; the top 50 companies account for 85% of industry revenue.
    • Large companies with sawmill operations include Weyerhauser Company and PotlatchDeltic Corporation. Large companies that provide wood preservation services include Koppers Holdings, and Pacific Wood.
    • Some large companies are vertically-integrated and own timberland or downstream operations, including divisions involving real estate ownership and residential construction.
                                  Industry Forecast
                                  Sawmills and Wood Preservation Industry Growth
                                  Source: Vertical IQ and Inforum

                                  Recent Developments

                                  Nov 1, 2022 - Sawmills Cut Production to Prop Up Prices
                                  • Major sawmill operators, including Interfor, Canfor, and West Frasier Timber, have curtailed production in the hope of supporting lumber prices amid weaker housing demand, according to The Wall Street Journal. Production cuts by low-cost sawmills in the US south may signal that mills are bracing for a downturn after September returned the weakest level of single-family housing starts since the pandemic lockdowns in the summer of 2020. If housing demand continues to falter, sawmills may have to reduce production further to keep prices from plummeting.
                                  • The NAHB/Westlake Royal Remodeling Market Index (RMI) reading for the third quarter of 2022 was 77, down 10 points from the third quarter of 2021, according to an October report by the National Association of Home Builders (NAHB). In the third quarter, 23% of remodelers said conditions were worse than they were three months earlier, 10% said they were better, and 67% said they were about the same. While the RMI reading for Q3 2022 dropped from a year earlier, overall conditions remained positive amid rising home equity, durable work-from-home trends, and aging housing stock. The NAHB expects a slight uptick in remodeling activity in 2023 as new home construction continues to slow.
                                  • New single-family home sales decreased 10.9% month over month and declined 17.6% year over year in September 2022, according to the US Department of Commerce. On a year-to-date basis, new home sales were down 14.3% in the first nine months of 2022 compared to the same period in 2021. According to a late-October survey of lenders by Freddie Mac, the average rate on a 30-year fixed mortgage was 7.08%. A year ago, the rate was just over 3%.
                                  • The war in Ukraine has increased Western European demand for US exports of wood pellets, which are burned in place of coal in power plants, according to The Wall Street Journal. The rise in pellet demand and prices could benefit sawmills as key feedstocks for pellet production include sawmill byproducts such as sawdust, understory brush, bark, and branches. The war has cut off Western Europe’s pellet supplies from Russia, Ukraine, and Belarus, creating an opportunity for North American producers, especially those in the “Pine Belt” in the southern US. Before insurance and shipping, average prices for wood pellets have risen to $170 per metric ton compared to about $140 in 2021.
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